Major Challenges in Minor Metals 21 March 2011 Dr. Heinz Schimmelbusch Chief Executive Officer AMG Advanced Metallurgical Group N.V.
Cautionary Note 2 THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION BY AMG ADVANCED METALLURGICAL GROUP N.V. (THE COMPANY ) AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LAWS. This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company or any of its subsidiaries nor should it or any part of it, nor the fact of its distribution, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation has been prepared by, and is the sole responsibility of, the Company. This document, any presentation made in conjunction herewith and any accompanying materials are for information only and are not a prospectus, offering circular or admission document. This presentation does not form a part of, and should not be construed as, an offer, invitation or solicitation to subscribe for or purchase, or dispose of any of the securities of the companies mentioned in this presentation. These materials do not constitute an offer of securities for sale in the United States or an invitation or an offer to the public or form of application to subscribe for securities. Neither this presentation nor anything contained herein shall form the basis of, or be relied on in connection with, any offer or commitment whatsoever. The information contained in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information or the opinions contained herein. The Company and its advisors are under no obligation to update or keep current the information contained in this presentation. To the extent allowed by law, none of the Company or its affiliates, advisors or representatives accept any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. Certain statements in this presentation constitute forward-looking statements, including statements regarding the Company's financial position, business strategy, plans and objectives of management for future operations. These statements, which contain the words "believe, expect, anticipate, intends, estimate, forecast, project, will, may, should and similar expressions, reflect the beliefs and expectations of the management board of directors of the Company and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, the achievement of the anticipated levels of profitability, growth, cost and synergy of the Company s recent acquisitions, the timely development and acceptance of new products, the impact of competitive pricing, the ability to obtain necessary regulatory approvals, and the impact of general business and global economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Neither the Company, nor any of its respective agents, employees or advisors intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this presentation. The information and opinions contained in this document are provided as of the date of this presentation and are subject to change without notice. This document has not been approved by any competent regulatory or supervisory authority. The information found in this presentation accompanied a speech delivered by Dr. Heinz Schimmelbusch on 21 March 2011 at the UBS Critical Raw Materials seminar in Frankfurt, Germany. The presentation materials were intended to be taken in context with the verbal comments made by Dr. Heinz Schimmelbush at this seminar.
3 Introduction
AMG Advanced Metallurgical Group N.V. Listed: Founded: 2006 Revenues: NYSE-Euronext Amsterdam: AMG $990.5M Employees: 2,600 Production facilities: Enterprise Value: Netherlands, Germany, UK, USA, Brazil, France, Turkey, Canada, Czech Republic, China, Mexico, Belgium, India, Poland, Sri Lanka 560 million 52 week range: 6.25 14.55 Recent share price: 14.49 (18 March 2011) 4
5 Critical Raw Materials: AMG s Involvement 1 H Hydrogen 1.0 3 Li Lithium 6.9 11 Na Sodium 23.0 19 K Potassium 39.1 37 Rb Rubidium 85.5 55 Cs Caesium 132.9 87 Fr Francium 223.0 88 Ra Radium 226.0 4 Be Beryllium 9.0 20 Ca Calcium 40.1 38 Sr Strontium 87.6 56 Ba Barium 137.4 39 Y Yitrium 88.9 57-71 89-103 21 Sc Scandium 45.0 22 Ti Titanium 47.9 40 Zr Zirconium 91.2 72 Hf Hafnium 178.5 104 Rf Rutherfordlium 261 23 V Vanadium 50.9 41 Nb Niobium 92.9 73 Ta Tantalum 181.0 105 Db Dubnium 262 24 Cr Chromium 52.0 42 Mo Molybdenum 95.9 74 W Tungsten 183.9 106 Sg Seaborgium 263 25 Mn Manganese 54.9 43 Tc Technetium 99 75 Re Rhenium 186.2 107 Bh Bohrium 264 26 Fe Iron 55.9 44 Ru Ruthenium 101.0 76 Os Osmium 190.2 108 Hs Hassium 265 27 Co Cobalt 58.9 45 Rh Rhodium 102.9 77 Ir Iridium 192.2 109 Mt Meitnerium 266 28 Ni Nickel 58.7 46 Pd Palladium 106.4 78 Pt Platinum 195.1 110 Ds Darmstadtium 269 29 Cu Copper 63.5 47 Ag Silver 107.9 79 Au Gold 197.0 111 Rg Roentgenium 272 30 Zn Zinc 65.4 48 Cd Cadmium 112.4 80 Hg Mercury 200.6 112 Uum Ununbium 277 5 B Boron 10.8 13 Al Aluminum 27.0 31 Ga Gallium 69.7 49 In Indium 114.8 81 Tl Thallium 204.4 113 Uut Ununtrium 284 6 C Carbon 12.0 14 Si Silicon 28.1 32 Ge Germanium 72.6 50 Sn Tin 118.7 82 Pb Lead 207.2 114 Uuq Ununquadium 289 7 N Nitrogen 14.0 15 P Phosphorus 31.0 33 As Arsenic 74.9 51 Sb Antimony 121.8 83 Bi Bismuth 209.0 115 Uup Ununpentium 288 8 O Oxygen 16.0 16 S Sulfur 32.1 34 Se Selenium 79.0 52 Te Tellurium 127.6 84 Po Polonium 210.0 116 Uuh Ununhexium 292 9 F Fluorine 19.0 17 Cl Chlorine 35.5 35 Br Bromine 79.9 53 I Iodine 126.9 85 At Astatine 210.0 2 He Helium 4.0 10 Ne Neon 20.2 18 Ar Argon 40.0 36 Kr Krypton 83.8 54 Xe Xenon 131.3 86 Rn Radon 222.0 57 La Lanthanum 138.9 89 Ac Actinium 132.9 90 Th Thorium 232.0 58 Ce Cerium 140.1 59 Pr Praseodymium 140.9 91 Pa Protactinium 231.0 60 Nd Neodymium 144.2 92 U Uranium 238.0 61 Pm Promethium 147.0 93 Np Neptunium 237.0 62 Sm Samarium 150.4 94 Pu Plutonium 242.0 62 Eu Europium 152.0 95 Am Americium 243.0 64 Gd Gadolinium 157.3 96 Cm Curium 247.0 65 Tb Terbium 158.9 97 Bk Berkelium 247.0 66 Dy Dysprosium 162.5 98 Cf Californium 251.0 67 Ho Holmium 164.9 99 Es Einsteinium 254.0 68 Er Erbium 167.3 100 Fm Fermium 253.0 69 Tm Thallium 168.9 101 Md Mendelevium 256.0 70 Yb Ytterbium 173.0 102 No Nobelium 254.0 71 Lu Lutetium 175.0 103 Lr Lawrencium 257.0 12 Mg Magnesium 24.3
Ti Alloys for Aerospace 6
Technology Leaps Trigger Rapid Demand Growth 7 Consumer Electronics Tantalum for capacitors Aerospace Titanium quantities for the Airbus A350 and Boeing 787 is over 2.5 times the amount used on aircraft they are replacing Solar Silicon metal demand for solar applications was 180,000 tons 10% of global production 20% growth per annum estimated Electric car E-Car Mineral Lithium Cathodes - 10-20% estimated growth per annum Natural Graphite Anodes Nuclear waste solutions
E-Cars Natural Graphite Anode (Graphite) e - Separator e - Cathode (Lithium) + Li + Li + Li + Li + Li + Li + Li + Li + Li + Li + Li + Li + Electrolyte Electrolyte Nissan Leaf (25 kwh) One car * battery = * Based on 30 kwh BMW Mini EV (35 kwh) 24 kg of graphite 2010 2015 Total Auto Sales (units) 70,169,000 91,872,000 % E-Car 1.1% 3.8% E-Car Sales (units) 774,000 3,484,000 Natural Graphite Needed (mt) 37,152 167,232 4.5x in 5 Years! 8 Sources: Credit Suisse, GK, company estimates
Demand Growth Critical Metals and Technology Development Ti Mg Cr V Sb Nb Ta Si C 9 Technology Development
Demand Growth Critical Metals and Technology Development Mg Ti Sb Cr Si Nb Ta V C 10 Technology Development
Reserve Depletion and Big New Finds Tantalum Greenbushes Tin Talison Global Advanced Metals, Australia (founded 1889) Niobium CBMM, Brazil (founded 1955) Molybdenum Jin Dui Cheng, Shanxi Province, China (founded 1970s) Rare Earths ( REE ) Bayan Obo, Inner Mongolia, China (founded 1980s) All are still the world s largest mines the same as 30 years ago 11 (1) World Titanium Market 2009 PSC VSMPO-Avisma Corporation
Recycling Only a Partial Solution, but Growing Hurdles Lack of collection systems, unattractive economics Lack of technologies, expensive development Dissipation metals vanishing into the end products Conclusion What can be (easily) recycled, is recycled Rarely big technology developments 12 (1) AMG estimates
Critical Raw Materials: Primary Supply, Recycling, Demand Severe Supply Risk Rapid Demand Growth Tantalum Niobium Magnesium Chromium Metal Graphite Lithium Limited Recycling Potential Silicon Metal Titanium Vanadium Cerium The world without government action 13 Source: Institute for Applied Technology, UNEP, July 2009; AMG
Critical Raw Materials: Primary Supply, Recycling, Demand Severe Supply Risk Limited Recycling Potential Rapid Demand Growth Silicon Metal Titanium Tantalum Graphite Niobium Magnesium Vanadium Cerium Chromium Metal Lithium The world with government action 14 Source: Institute for Applied Technology, UNEP, July 2009; AMG
Volatility Titanium Sponge $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 00 01 02 03 04 05 06 07 08 09 10 $70 $60 $50 $40 $30 $20 $10 $0 Fe Vanadium 00 01 02 03 04 05 06 07 08 09 10 $14,000 $12,000 $10,000 $8,000 $6,000 Antimony $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 Silicon Metal $4,000 $2,000 $0 00 01 02 03 04 05 06 07 08 09 10 $1,500 $1,000 $500 $0 00 01 02 03 04 05 06 07 08 09 10 15 Sources: AMG, Bloomberg
Volatility - Cerium $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 00 01 02 03 04 05 06 07 08 09 16 Sources: AMG, Bloomberg
Critical Raw Materials: Definition 17
Critical Raw Materials EU Definition The EU is highly dependent on imports of high tech metals such as cobalt, platinum, rare earths, and titanium. Such materials play an essential role in the development of innovative environmental technologies for boosting energy efficiency and reducing greenhouse gas emissions. Some raw materials can be considered to be particularly critical, because of three reasons: their significant economic importance for key sectors high supply risks lack of substitutes - ad hoc group of the Raw Materials Supply Group in a report to the European Commission, June 2010 18
Critical Raw Materials EU Listing 14 The EU identified 14 critical raw materials to the European economy Antimony Indium Beryllium Magnesium Cobalt Niobium Fluorspar PGM Gallium Tungsten Germanium Tantalum Graphite Rare Earth 19 (1) EU Report on Critical Raw Materials, June 2010
Critical Raw Materials Critical raw materials 20 (1) European Commission Annex V to the Report of the Ad-hoc Working Group on defining critical raw materials
Critical Raw Materials In addition to the EU 14 materials, AMG believes that following are critical based upon the EU criteria: Vanadium (1) Silicon metal Titanium sponge (1) Chromium metal Mineral Lithium (1) This critical list would include 11 materials that involve AMG That would bring the 14 EU Critical Materials to 19 21 (1) Included as critical by the U.S. National Academies (U.S. Congress Scientific arm)
Critical Raw Materials: Geography 22
Critical Raw Materials Government Controls Titanium Vanadium Chromium Magnesium Titanium Magnesium Antimony Magnesium Chromium Antimony Graphite REE Magnesium Silicon Titanium Vanadium Graphite Titanium Government Controls Tantalum Niobium Magnesium Tantalum Vanadium Tantalum Graphite Tantalum 23 Source: AMG
Sovereign Strategies: an Interpretation
Critical Raw Materials - Sovereign Strategies Sovereigns Reduced domestic production Foreign processors welcome to produce in country Export Restrictions Reduced depletion, environmental impact Acquisition of foreign assets and technology Global industry leadership headquartered in country Price increases 25
China s Position in Critical Minor Metals Metal Activity Trade Restrictions Market Share Antimony Mining Export Quotas 90%+ Tantalum Processor ----- 10% Silicon Metal Mining Tariffs 50%+ Vanadium Slag ----- 33% Graphite Mining, Smelting Tariffs 70% Titanium Sponge Production Tariffs 33% Niobium Processing ----- N/A Strontium Production Export Quotas 90%+ Cerium Mining Export Quotas 90%+ Chromium Metal Smelting ----- 50%+ Magnesium Production ----- 80%+ 26 Sources: AMG,
Cerium Revisited 27 Sources: AMG Volatility will be even higher in the future
Germany s dependency on China selected metals: Metal China s Production Rank Germany s Import Percentage Titanium 1 100 Vanadium 2 100 Silicon Metal 2 85 Chromium Metal 1 100 Strontium 1 100 28 Source: AMG
Magnesium Market Statistics Conclusion 29
AMG s Strategy Serve growing end markets with high value-added specialty metal products and engineering solutions, related to CO 2 reduction and conservation of natural resources Execute through a combination of: Vertical integration Industry consolidation Continuous investment in productivity and technology 30
Conclusion Minor Metals are essential to the global economy Governments now have significant and increasing roles Very attractive rewards, but very high barriers of entry Due to technology, this will remain a long-term business 31